“Made in Europe”: industrial resurgence or protectionist mirage for the EU?

Is the “European preference” in industry defended by Emmanuel Macron – and by almost all French political parties – THE solution for the EU? Long perceived as a Franco-French whim, the idea is making its way within the Union’s institutions, as “Factory Europe” finds itself in dire straits, from renewables to chemicals, steel, batteries and the automotive sector. The principle? To systematically favour “Made in Europe” products whenever taxpayer money is spent across the Twenty-Seven, notably through public procurement.

For the EU, traditionally in favour of free trade, embracing such a novelty is anything but natural. This is especially true in the northern part of the continent, such as Germany, where any measure resembling protectionism has historically been viewed with great suspicion. However, long-standing positions now appear to be shifting in the face of the ongoing industrial debacle. Since 2023, German industry has lost 240,000 jobs, or 10,000 per month, notably under pressure from the Chinese juggernaut. Beijing, like Washington and many others, has no qualms about favouring its own companies…

Thus, the European Commission is expected to propose introducing a first dose of preference for products manufactured in Europe as part of a reform known as the “Industrial Accelerator,” due to be presented on February 25. “The Chinese have ‘made in China,’ the Americans have ‘buy American,’ and most other major economic powers have similar programs, giving preference to their own strategic strengths. So why not us?” summarized Commission Vice-President Stéphane Séjourné of France in a recent op-ed signed alongside more than a thousand EU business leaders.

Economic and budgetary resistance

However, this close ally of Emmanuel Macron tasked with drafting the reform has, in recent months, had to scale back the initial ambition of his proposal and postpone its presentation several times due to strong internal resistance. In fact, “Made in EU” should begin to apply gradually, and only to certain products in a limited number of sectors deemed “strategic.”

According to a draft leaked to the press, these include chemicals, automotive and steel. But also, low-carbon industries (batteries, photovoltaics, wind power, heat pumps, geothermal energy, CO₂ capture technologies) where the EU risks being wiped off the map, most often in the face of Chinese dominance.

While the concept may seem straightforward on paper, European preference also raises legitimate criticism. At a time when industrial value chains are so complex and globalized, is there not a risk, for example, of shooting in the foot those EU industrial companies that rely on numerous foreign components?

“The requirements of ‘Made in Europe’ could increase costs for export-oriented industries, slowing industrial transformation and, ultimately, the transition to clean energy. (…),” argues a recent note from the Brussels-based liberal think tank Bruegel. “For example, four-fifths of the EU’s battery cell manufacturing capacity has been built by Korean companies, supporting European carmakers investing in electric vehicle production,” it further states.

Another limitation concerns public finances. If, in public procurement, administrations across the Twenty-Seven begin favouring providers producing in Europe rather than those offering the most advantageous price, the overall bill could be steep, at a time when many Member States are already heavily indebted.

Sceptics in Brussels advocate proceeding with caution. In a recent letter addressed to the Commission, six northern European states (Estonia, Finland, Latvia, Lithuania, the Netherlands and Sweden) called for the future reform to be “limited, proportionate and mindful of its repercussions.” These governments also worry that European preference could create “a new layer of complex regulation” for companies.

Persistent legal obstacles

Some reservations are also legal in nature. The EU has formally committed to granting access to its public procurement markets to firms from third countries by signing, in particular, the Plurilateral Agreement on Government Procurement under the auspices of the WTO, as well as various bilateral trade agreements with dozens of partners worldwide.

“Violations of such commitments would damage the EU’s reputation and would likely trigger legal challenges from close allies such as Japan or the United Kingdom,” Bruegel states in its note. Considering all these constraints, an alternative appears to have emerged within the Commission: shifting the concept from “Made in Europe” to “Made with Europe.”

This is what Germany and Italy, the Union’s two leading industrial powers (ahead of France), advocate, both aware of the risks associated with a strict European preference and of the pressing need to better protect the Old Continent’s production. In practical terms, components from certain partner countries (for example, the United Kingdom, Canada or Japan) could receive the same preferential treatment as those of EU companies.

The question then becomes: how many states should be granted this favour? Stéphane Séjourné would like to limit it to a handful of very close allies, under certain conditions. The far more liberal Trade Commissioner Maroš Šefčovič, for his part, argues for including production sites in all 80 partners with which the EU has signed free trade agreements. In that case, “Made with Europe” would a priori not represent a major revolution, although neither the United States nor China appear on that list.

Written by: Clément Solal (journalist) and Vincent Couronne (Doctor of European Law (proofreader))